Under current law, the pension benefits of certain public employees are exempt
from state taxation. The pensions that are exempt include payments received from
the U.S. civil service retirement system, the U.S. military employee retirement
system, the Milwaukee city and county retirement systems, the Police Officer's
Annuity and Benefit Fund of Milwaukee, the Milwaukee Public School Teachers'
Retirement Fund, the Wisconsin State Teachers' Retirement Fund, and the Sheriff's
Annuity and Benefit Fund of Milwaukee County. For most of these pension plans,
the exemption applies only to persons who were members of or retired from the plans
as of December 31, 1963, although this limitation does not apply to retirement
payments received from the U.S. military employee retirement system or from
payments received from the U.S. government that relate to service with the U.S.
Coast Guard, the commissioned corps of the National Oceanic and Atmospheric
Administration, or the commissioned corps of the U.S. Public Health Service.

For taxable years beginning after December 31, 2008, current law, as created
in 2007 Wisconsin Act 20 (the biennial budget bill), also exempts from taxation up

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to $5,000 of payments or distributions received each year by an individual from a
qualified retirement plan under the Internal Revenue Code or from an individual
retirement account, subject to a number of conditions, if such payments are not
already exempt from taxation. The conditions include a requirement that the
claimant must be at least 65 years old, that a claimant filing as single or head of
household have federal adjusted gross income (FAGI) of less than $15,000 in the year
to which the claim relates, and that a claimant who is married and a joint filer have
FAGI of less than $30,000.

For taxable years beginning after December 31, 2008, this bill exempts from
taxation a certain amount of payments or distributions received each year by
individuals from a qualified retirement plan under the Internal Revenue Code, if
such payments are not already exempt from taxation, and if the payments or
distributions relate to the individuals' service as hazardous duty personnel. The bill
defines "hazardous duty personnel" as a police officer, fire fighter, sheriff, sheriff's
deputy, state trooper, or emergency medical technician. For taxable year 2009, the
amount that is exempt from taxation is $1,000. The exemption amount increases by
$1,000 each year until the amount reaches $30,000 for taxable years beginning after
December 31, 2037.

This bill also creates a committee to determine whether it is in the best interest
of this state to reduce or eliminate the income taxation on some or all pension income
and, if so, what the best method is to achieve this goal. The committee is made up
of the governor and the majority and minority leaders of each house of the
legislature, or each such person's designee. The committee must issue a report on
its findings to both houses of the legislature no later than December 15, 2008, and
the committee does not exist after its report is issued.